To amend the Public Utility Regulatory Policies Act of
1978 to create a market-oriented standard for clean electric energy generation,
and for other purposes.

1.

Short title

This Act may be cited as the
Clean Energy Standard Act of
2012.

2.

Federal clean energy
standard

Title VI of the
Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 2601 et seq.) is
amended by adding at the end the following:

610.

Federal clean
energy standard

(a)

Purpose

The
purpose of this section is to create a market-oriented standard for electric
energy generation that stimulates clean energy innovation and promotes a
diverse set of low- and zero-carbon generation solutions in the United States
at the lowest incremental cost to electric consumers.

(b)

Definitions

In
this section:

(1)

Clean
energy

The term clean energy means electric energy
that is generated—

(A)

at a facility
placed in service after December 31, 1991, using—

(i)

renewable
energy;

(ii)

qualified
renewable biomass;

(iii)

natural
gas;

(iv)

hydropower;

(v)

nuclear power;
or

(vi)

qualified
waste-to-energy;

(B)

at a facility
placed in service after the date of enactment of this section, using—

(i)

qualified
combined heat and power; or

(ii)

a source of
energy, other than biomass, with lower annual carbon intensity than 0.82 metric
tons of carbon dioxide equivalent per megawatt-hour;

(C)

as a result of
qualified efficiency improvements or capacity additions; or

(D)

at a facility
that captures carbon dioxide and prevents the release of the carbon dioxide
into the atmosphere.

(2)

Natural
gas

(A)

Inclusion

The
term natural gas includes coal mine methane.

(B)

Exclusions

The
term natural gas excludes landfill methane and biogas.

(3)

Qualified
combined heat and power

(A)

In
general

The term qualified combined heat and power
means a system that—

(i)

uses the same
energy source for the simultaneous or sequential generation of electrical
energy and thermal energy;

(ii)

produces at
least—

(I)

20 percent of the
useful energy of the system in the form of electricity; and

(II)

20 percent of
the useful energy in the form of useful thermal energy;

(iii)

to the extent
the system uses biomass, uses only qualified renewable biomass; and

(iv)

operates with an
energy efficiency percentage that is greater than 50 percent.

(B)

Determination
of energy efficiency

For purposes of subparagraph (A), the energy
efficiency percentage of a combined heat and power system shall be determined
in accordance with section 48(c)(3)(C)(i) of the Internal Revenue Code of
1986.

(4)

Qualified
efficiency improvements or capacity additions

(A)

In
general

Subject to subparagraphs (B) and (C), the term
qualified efficiency improvements or capacity additions means
efficiency improvements or capacity additions made after December 31, 1991,
to—

(i)

a
nuclear facility placed in service on or before December 31, 1991; or

(ii)

a hydropower
facility placed in service on or before December 31, 1991.

(B)

Exclusion

The
term qualified efficiency improvements or capacity additions does
not include additional electric energy generated as a result of operational
changes not directly associated with efficiency improvements or capacity
additions.

(C)

Measurement and
certification

In the case of hydropower, efficiency improvements
and capacity additions under this paragraph shall be—

(i)

measured on the
basis of the same water flow information that is used to determine the historic
average annual generation for the applicable hydroelectric facility; and

(ii)

certified by the
Secretary or the Commission.

(5)

Qualified
renewable biomass

The term qualified renewable
biomass means renewable biomass produced and harvested through land
management practices that maintain or restore the composition, structure, and
processes of ecosystems, including the diversity of plant and animal
communities, water quality, and the productive capacity of soil and the
ecological systems.

(6)

Qualified
waste-to-energy

The term qualified waste-to-energy
means energy produced—

(A)

from the
combustion of—

(i)

post-recycled
municipal solid waste;

(ii)

gas produced
from the gasification or pyrolization of post-recycled municipal solid
waste;

(iii)

biogas;

(iv)

landfill
methane;

(v)

animal waste or
animal byproducts; or

(vi)

wood, paper
products that are not commonly recyclable, and vegetation (including trees and
trimmings, yard waste, pallets, railroad ties, crates, and solid-wood
manufacturing and construction debris), if diverted from or separated from
other waste out of a municipal waste stream; and

(B)

at a facility
that the Commission has certified, on an annual basis, is in compliance with
all applicable Federal and State environmental permits, including—

(i)

in the case of a
facility that commences operation before the date of enactment of this section,
compliance with emission standards under sections 112 and 129 of the Clean Air
Act (42 U.S.C. 7412, 7429) that apply as of the date of enactment of this
section to new facilities within the applicable source category; and

(ii)

in the case of a
facility that produces electric energy from the combustion, pyrolization, or
gasification of municipal solid waste, certification that each local government
unit from which the waste originates operates, participates in the operation
of, contracts for, or otherwise provides for recycling services for residents
of the local government unit.

Effective beginning in calendar year 2015, each electric
utility that sells electric energy to electric consumers in a State shall
obtain a percentage of the electric energy the electric utility sells to
electric consumers during a calendar year from clean energy.

(2)

Percentage
required

The percentage of electric energy sold during a calendar
year that is required to be clean energy under paragraph (1) shall be
determined in accordance with the following table:

Calendar year

Minimum
annual percentage

2015

24

2016

27

2017

30

2018

33

2019

36

2020

39

2021

42

2022

45

2023

48

2024

51

2025

54

2026

57

2027

60

2028

63

2029

66

2030

69

2031

72

2032

75

2033

78

2034

81

2035

84.

(3)

Deduction for
electric energy generated from hydropower or nuclear power

An
electric utility that sells electric energy to electric consumers from a
facility placed in service in the United States on or before December 31, 1991,
using hydropower or nuclear power may deduct the quantity of the electric
energy from the quantity to which the percentage in paragraph (2)
applies.

making
alternative compliance payments of 3 cents per kilowatt hour in accordance with
subsection (i); or

(3)

taking a
combination of actions described in paragraphs (1) and (2).

(e)

Federal clean
energy trading program

(1)

Establishment

Not
later than 180 days after the date of enactment of this section, the Secretary
shall establish a Federal clean energy credit trading program under which
electric utilities may submit to the Secretary clean energy credits to certify
compliance by the electric utilities with subsection (c).

(2)

Clean energy
credits

Except as provided in paragraph (3)(B), the Secretary
shall issue to each generator of electric energy a quantity of clean energy
credits determined in accordance with subsections (f) and (g).

(3)

Administration

In
carrying out the program under this subsection, the Secretary shall ensure
that—

(A)

a clean energy
credit shall be used only once for purposes of compliance with this section;
and

(B)

a clean energy
credit issued for clean energy generated and sold for resale under a contract
in effect on the date of enactment of this section shall be issued to the
purchasing electric utility, unless otherwise provided by the contract.

(4)

Delegation of
market function

(A)

In
general

In carrying out the program under this subsection, the
Secretary may delegate—

(i)

to 1 or more
appropriate market-making entities, the administration of a national clean
energy credit market for purposes of establishing a transparent national market
for the sale or trade of clean energy credits; and

(ii)

to appropriate
entities, the tracking of dispatch of clean generation.

(B)

Administration

In
making a delegation under subparagraph (A)(ii), the Secretary shall ensure that
the tracking and reporting of information concerning the dispatch of clean
generation is transparent, verifiable, and independent of any generation or
load interests subject to an obligation under this section.

(5)

Banking of
clean energy credits

Clean energy credits to be used for
compliance purposes under subsection (c) shall be valid for the year in which
the clean energy credits are issued or in any subsequent calendar year.

(f)

Determination
of quantity of credit

(1)

In
general

Except as otherwise provided in this subsection, the
quantity of clean energy credits issued to each electric utility generating
electric energy in the United States from clean energy shall be equal to the
product of—

(A)

for each
generator owned by a utility, the number of megawatt-hours of electric energy
sold from that generator by the utility; and

(B)

the difference
between—

(i)

1.0; and

(ii)

the quotient
obtained by dividing—

(I)

the annual carbon
intensity of the generator, as determined in accordance with subsection (g),
expressed in metric tons per megawatt-hour; by

(II)

0.82.

(2)

Negative
credits

Notwithstanding any other provision of this subsection,
the Secretary shall not issue a negative quantity of clean energy credits to
any generator.

(3)

Qualified
combined heat and power

(A)

In
general

The quantity of clean energy credits issued to an owner
of a qualified combined heat and power system in the United States shall be
equal to the difference between—

(i)

the product
obtained by multiplying—

(I)

the number of
megawatt-hours of electric energy generated by the system; and

(II)

the difference
between—

(aa)

1.0; and

(bb)

the quotient
obtained by dividing—

(AA)

the annual
carbon intensity of the generator, as determined in accordance with subsection
(g), expressed in metric tons per megawatt-hour; by

(BB)

0.82; and

(ii)

the product
obtained by multiplying—

(I)

the number of
megawatt-hours of electric energy generated by the system that are consumed
onsite by the facility; and

(II)

the annual
target for electric energy sold during a calendar year that is required to be
clean energy under subsection (c)(2).

(B)

Additional
credits

In addition to credits issued under subparagraph (A), the
Secretary shall award clean energy credits to an owner of a qualified heat and
power system in the United States for greenhouse gas emissions avoided as a
result of the use of a qualified combined heat and power system, rather than a
separate thermal source, to meet onsite thermal needs.

(4)

Qualified
waste-to-energy

The quantity of clean energy credits issued to an
electric utility generating electric energy in the United States from a
qualified waste-to-energy facility shall be equal to the product obtained by
multiplying—

(A)

the number of
megawatt-hours of electric energy generated by the facility and sold by the
utility; and

(B)

1.0.

(g)

Determination
of annual carbon intensity of generating facilities

(1)

In
general

For purposes of determining the quantity of credits under
subsection (f), except as provided in paragraph (2), the Secretary shall
determine the annual carbon intensity of each generator by dividing—

(A)

the net annual
carbon dioxide equivalent emissions of the generator; by

(B)

the annual
quantity of electricity generated by the generator.

(2)

Biomass

The
Secretary shall—

(A)

not later than
180 days after the date of enactment of this section, issue interim regulations
for determining the carbon intensity based on an initial consideration of the
issues to be reported on under subparagraph (B);

(B)

not later than
180 days after the date of enactment of this section, enter into an agreement
with the National Academy of Sciences under which the Academy shall—

(i)

evaluate models
and methodologies for quantifying net changes in greenhouse gas emissions
associated with generating electric energy from each significant source of
qualified renewable biomass, including evaluation of additional sequestration
or emissions associated with changes in land use by the production of the
biomass; and

(ii)

not later than 1
year after the date of enactment of this section, publish a report that
includes—

(I)

a description of
the evaluation required by clause (i); and

(II)

recommendations
for determining the carbon intensity of electric energy generated from
qualified renewable biomass under this section; and

(C)

not later than
180 days after the publication of the report under subparagraph (B)(ii), issue
regulations for determining the carbon intensity of electric energy generated
from qualified renewable biomass that take into account the report.

(3)

Consultation

The
Secretary shall consult with—

(A)

the Administrator
of the Environmental Protection Agency in determining the annual carbon
intensity of generating facilities under paragraph (1); and

(B)

the Administrator
of the Environmental Protection Agency, the Secretary of the Interior, and the
Secretary of Agriculture in issuing regulations for determining the carbon
intensity of electric energy generated by biomass under paragraph
(2)(C).

(h)

Civil
penalties

(1)

In
general

Subject to paragraph (2), an electric utility that fails
to meet the requirements of this section shall be subject to a civil penalty in
an amount equal to the product obtained by multiplying—

(A)

the number of
kilowatt-hours of electric energy sold by the utility to electric consumers in
violation of subsection (c); and

(B)

200 percent of
the value of the alternative compliance payment, as adjusted under subsection
(m).

(2)

Waivers and
mitigation

(A)

Force
majeure

The Secretary may mitigate or waive a civil penalty under
this subsection if the electric utility was unable to comply with an applicable
requirement of this section for reasons outside of the reasonable control of
the utility.

(B)

Reduction for
State penalties

The Secretary shall reduce the amount of a
penalty determined under paragraph (1) by the amount paid by the electric
utility to a State for failure to comply with the requirement of a State
renewable energy program, if the State requirement is more stringent than the
applicable requirement of this section.

(3)

Procedure for
assessing penalty

The Secretary shall assess a civil penalty
under this subsection in accordance with section 333(d) of the Energy Policy
and Conservation Act (42 U.S.C. 6303(d)).

(i)

Alternative
compliance payments

An electric utility may satisfy the
requirements of subsection (c), in whole or in part, by submitting in lieu of a
clean energy credit issued under this section a payment equal to the amount
required under subsection (d)(2), in accordance with such regulations as the
Secretary may promulgate.

(j)

State energy
efficiency funding program

(1)

Establishment

Not
later than December 31, 2015, the Secretary shall establish a State energy
efficiency funding program.

(2)

Funding

All
funds collected by the Secretary as alternative compliance payments under
subsection (i), or as civil penalties under subsection (h), shall be used
solely to carry out the program under this subsection.

(3)

Distribution to
States

(A)

In
general

An amount equal to 75 percent of the funds described in
paragraph (2) shall be used by the Secretary, without further appropriation or
fiscal year limitation, to provide funds to States for the implementation of
State energy efficiency plans under section 362 of the Energy Policy and
Conservation Act (42 U.S.C. 6322), in accordance with the proportion of those
amounts collected by the Secretary from each State.

(B)

Action by
States

A State that receives funds under this paragraph shall
maintain such records and evidence of compliance as the Secretary may
require.

(4)

Guidelines and
criteria

The Secretary may issue such additional guidelines and
criteria for the program under this subsection as the Secretary determines to
be appropriate.

(k)

Exemptions

(1)

In
general

This section shall not apply during any calendar year to
an electric utility that sold less than the applicable quantity described in
paragraph (2) of megawatt-hours of electric energy to electric consumers during
the preceding calendar year.

(2)

Applicable
quantity

For purposes of paragraph (1), the applicable quantity
is—

(A)

in the case of
calendar year 2015, 2,000,000;

(B)

in the case of
calendar year 2016, 1,900,000;

(C)

in the case of
calendar year 2017, 1,800,000;

(D)

in the case of
calendar year 2018, 1,700,000;

(E)

in the case of
calendar year 2019, 1,600,000;

(F)

in the case of
calendar year 2020, 1,500,000;

(G)

in the case of
calendar year 2021, 1,400,000;

(H)

in the case of
calendar year 2022, 1,300,000;

(I)

in the case of
calendar year 2023, 1,200,000;

(J)

in the case of
calendar year 2024, 1,100,000; and

(K)

in the case of
calendar year 2025 and each calendar year thereafter, 1,000,000.

(3)

Calculation of
electric energy sold

(A)

Definitions

In
this subsection, the terms affiliate and associate
company have the meanings given the terms in section 1262 of the Energy
Policy Act of 2005 (42 U.S.C. 16451).

(B)

Inclusion

For
purposes of calculating the quantity of electric energy sold by an electric
utility under this subsection, the quantity of electric energy sold by an
affiliate of the electric utility or an associate company shall be treated as
sold by the electric utility.

(l)

State
programs

(1)

Savings
provision

(A)

In
general

Subject to paragraph (2), nothing in this section affects
the authority of a State or a political subdivision of a State to adopt or
enforce any law or regulation relating to—

(i)

clean or
renewable energy; or

(ii)

the regulation
of an electric utility.

(B)

Federal
law

No law or regulation of a State or a political subdivision of
a State may relieve an electric utility from compliance with an applicable
requirement of this section.

(2)

Coordination

The
Secretary, in consultation with States that have clean and renewable energy
programs in effect, shall facilitate, to the maximum extent practicable,
coordination between the Federal clean energy program under this section and
the relevant State clean and renewable energy programs.

(m)

Adjustment of
alternative compliance payment

Not later than December 31, 2016,
and annually thereafter, the Secretary shall—

(1)

increase by 5
percent the rate of the alternative compliance payment under subsection (d)(2);
and

(2)

additionally
adjust that rate for inflation, as the Secretary determines to be
necessary.

(n)

Report on clean
energy resources that do not generate electric energy

(1)

In
general

Not later than 3 years after the date of enactment of
this section, the Secretary shall submit to Congress a report examining
mechanisms to supplement the standard under this section by addressing clean
energy resources that do not generate electric energy but that may
substantially reduce electric energy loads, including energy efficiency,
biomass converted to thermal energy, geothermal energy collected using heat
pumps, thermal energy delivered through district heating systems, and waste
heat used as industrial process heat.

(2)

Potential
integration

The report under paragraph (1) shall examine the
benefits and challenges of integrating the additional clean energy resources
into the standard established by this section, including—

(A)

the extent to
which such an integration would achieve the purposes of this section;

(B)

the manner in
which a baseline describing the use of the resources could be developed that
would ensure that only incremental action that increased the use of the
resources received credit; and

(C)

the challenges of
pricing the resources in a comparable manner between organized markets and
vertically integrated markets, including options for the pricing.

(3)

Complementary
policies

The report under paragraph (1) shall examine the
benefits and challenges of using complementary policies or standards, other
than the standard established under this section, to provide effective
incentives for using the additional clean energy resources.

(4)

Legislative
recommendations

As part of the report under paragraph (1), the
Secretary may provide legislative recommendations for changes to the standard
established under this section or new complementary policies that would provide
effective incentives for using the additional clean energy resources.

(o)

Exclusions

This
section does not apply to an electric utility located in the State of Alaska or
Hawaii.

(p)

Regulations

Not
later than 1 year after the date of enactment of this section, the Secretary
shall promulgate regulations to implement this section.

611.

Report on
natural gas conservation

Not
later than 2 years after the date of enactment of this section, the Secretary
shall submit to Congress a report that—

(1)

quantifies the losses of natural gas during
the production and transportation of the natural gas; and

(2)

makes recommendations, as appropriate, for
programs and policies to promote conservation of natural gas for beneficial
use.